Virtual care behemoth Teladoc projects that revenue from its direct-to-consumer behavioral health service, BetterHelp, will remain in the red for the first half of the year.
In Q1, BetterHelp saw revenue decline by 4% and a membership decline of 11% compared to the same quarter last year. Looking into the next quarter, the company expects BetterHelp revenue to be in the range of negative 8% to negative 4% over the prior year period.
Company leadership attributed the BetterHelp turbulence to advertising yield cost, a historic difficulty for the company.
“Our second quarter guidance reflects challenging cost-per-acquisition through early Q1, which caused us to pull back on our advertising dollars in the quarter in keeping with our goal of balancing growth and margin,” Mala Murthy, interim CEO and chief financial officer at Teladoc, said during the company’s Q1 earnings call. “These factors led to a decline in users in Q1, which is impacting our Q2 revenue growth rate on top of a difficult comparison relative to the second quarter of 2023. However, we are seeing signs of stabilization in our cost-per-acquisition (CPA) in more recent weeks, which gives us increased confidence in the back half of the year for the BetterHelp business.”
This comes less than a month after Teladoc’s long-time CEO Jason Gorevic announced he was stepping down amid the company’s ongoing struggles on the public market.
During the earnings call, Murthy noted that the company’s board of directors is conducting a new CEO search.
“In the meantime, however, we are wasting no time in identifying and seizing opportunities to leverage our significant assets and capabilities,” Murthy said. “As an organization, our focus is on accelerating growth on both the top and bottom line over the medium and longer term. My focus as acting CEO is to ensure that our strategy continues to be supported by the appropriate level of investment and that our leadership team is executing on our priorities.”
Still, the company expects flat to low single digital revenue growth for the full year for the BetterHelp segment. While BetterHelp’s performance is shaky, Murthy outlined several initiatives that could help boost the service line’s numbers in the second half of the year.
For starters, the company is doubling down on expanding its international efforts.
“Late last year, we brought in new leadership for BetterHelp who have helped inject a broader and more global perspective,” Murthy said. “On growth levers for this business, we are seeing improvements in retention and at our international business, which are helping offset some of the impact from higher CAPs in the US by improving our overall yield on advertising spend. The success we are starting to see with these levers, along with the effort in select international geographies that we expect to ramp up in the second half of the year, give us confidence in our second-half BetteHelp outcomes. We expect these initiatives to lead to meaningfully higher membership growth and improve customer retention versus the first half of the year.”
These efforts will focus on English-speaking countries that BetterHelp has already penetrated, including the U.K., Canada, and Australia. Murthy noted that the company already knows the dynamics of BetterHelp in these markets.
While Teladoc’s numbers were down in Q1, Teladoc’s overall revenue reached $646.1 million, a 3% increase over the previous year. Specifically, the company’s integrated care segment saw an 8% revenue increase. Its EBITDA increased by 20% to $63.1 million from $52.8 million the previous year.
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